Archive for October, 2020

• Morning News: October 16, 2020
  Eddy Elfenbein, October 16th, 2020 at 7:02 am

  Top World Bank Economist Says Financial Crisis Could Emerge From Pandemic

  Wall Street Bank Trading Boom Does Little To Assuage Concerns About Lending

  Twitter Changes Course After Republicans Claim ‘Election Interference’ & Facebook and Twitter Dodge a 2016 Repeat, and Ignite a 2020 Firestorm

  A Biden Win Would Transform How the Wealthy Invest Their Money

  U.S. Judge ‘Not Inclined’ To Reverse Decision On WeChat App Store Ban

  Boeing Max Judged Safe to Fly by Europe’s Aviation Regulator

  Antiviral Drug Remdesivir Proves Ineffective In Treating Covid-19, WHO Study Finds

  Here’s Why Canned Corn Might Be Tough to Find At Supermarkets

  Former Pipe Factory Worker Becomes a Budget-Store Billionaire

  Shares of Gun Makers Gain as Biden’s Lead Grows

  Feds Charge Tech Mogul Robert Brockman With Hiding $2 billion From IRS

  Michael Batnick: This Time Was Different

  Cullen Roche: Three Things I Think I Think – Cycles, Hunting Biden and Hacking Life

  Ben Carlson: The Similarities Between Shane Battier and John Maynard Keynes

  Joshua Brown: Here’s A Blank Slate & Countdown to the Election – Live Webcast

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• Jobless Claims Rise to 898,000
  Eddy Elfenbein, October 15th, 2020 at 11:07 am

  This morning’s jobless claims report rose to 898,000. That was above Wall Street’s forecast of 830,000. This was also the highest report since August 22. I’ve talked before about the increase slowing down, but now claims are now moving in the wrong direction.

  The total for the week ended Oct. 10 was the highest number since Aug. 22 and another sign that the labor market continues to struggle to get back to its pre-coronavirus pandemic mark as cases rise and worries increase over a renewed wave in the fall and winter. The number represented a gain of 53,000 from the previous week’s upwardly revised total of 845,000.

  

  The stimulus talks appear to be deadlocked but the White House has signaled its willingness to keep negotiating.

  House Speaker Nancy Pelosi, the lead negotiator for Democrats, had identified testing as one of the main sticking points in talks. Mnuchin appeared to cede ground to the speaker in an interview on CNBC’s “Squawk Box.”

  “That issue is getting overblown,” Mnuchin said. “We’ve agreed to $178 billion overall for health. It’s an extraordinary amount of money. We’d agreed with the Democrats with $75 billion going to testing, contact tracing.”

  The big banks are usually the first to report earnings and today we got the report from Morgan Stanley. The bank had a solid Q3. Overall, the banks are doing pretty well. This week, Morgan Stanley’s market cap passed Citigroup’s.

  The banks are currently not allowed to increase dividends or buy back stock. This has resulted in a growing cash hoard at the banks.

• Morning News: October 15, 2020
  Eddy Elfenbein, October 15th, 2020 at 7:09 am

  IMF Sees Worldwide Debt Soaring to 100 Percent of GDP Due to COVID-19

  ECB Sees Little Reason to Rush Into New Stimulus This Month

  Trump Administration to Consider Adding China’s Ant Group to Trade Blacklist

  Stepped Up Chinese Scrutiny Increases Investment Risk of ‘Beast’ Ant

  Japanese Automakers Are Helping Fuel U.S. Recovery

  Bank Earnings Show Diverging Fortunes on Wall Street and Main Street

  Value Stocks Could Shine After U.S. Election, No Matter Who Wins

  The End Of Oil? Battle Lines Drawn As Industry Grapples With Energy’s Future

  Why These Retail Giants Are Booming Amid The Pandemic

  A Small Business Argument for Joe Biden & What Small Business Owners Really Need From the Next President

  DOJ Shoots Down DirecTV and Dish Merger Again

  BTS Management’s Stock Soars on First Day of Trading

  Rethinking Retirement

  Ben Carlson: Animal Spirits: Bearish the Whole Way Up

  Michael Batnick: Chart of the Day

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• Earnings Season Begins
  Eddy Elfenbein, October 14th, 2020 at 11:26 am

  Yesterday, the market snapped its four-day winning streak, but stocks are up again today. Energy is particularly strong while the rest of the market is mixed. We got some of the first earnings reports this morning. The banks are usually first. Goldman Sachs crushed expectations ($9.68 vs $5.57) while Wells Fargo and Bank of America both missed expectations.

  Richard Clarida, the vice-chair of the Fed, told the Institute of International Finance, “That said, the Covid-19 recession threw the economy into a very deep hole, and it will take some time, perhaps another year, for the level of GDP to fully recover to its previous 2019 peak…It will likely take even longer than that for the unemployment rate to return to a level consistent with our maximum-employment mandate.”

• Morning News: October 14, 2020
  Eddy Elfenbein, October 14th, 2020 at 7:02 am

  Europe Can Impose Tariffs on U.S. in Long-Running Aircraft Battle

  After Two Lost Decades, U.S.’s Weakest Local Economies May Face Worse From Pandemic

  Stocks Are Soaring — But Most Black People Are Missing Out

  FDA Faults Quality Control at Lilly Plant Making Trump-Touted COVID Drug

  BTS’s Loyal Army of Fans Is the Secret Weapon Behind a $4 Billion I.P.O.

  Walmart’s Black Friday Plan Caps Customer Capacity at Just 20%

  Amazon’s ‘Christmas Creep’ Poses Stress Test for FedEx, UPS

  In China, Apple’s 5G iPhone 12 Sparks Fever-Pitch, But Divided Reaction

  Three Things Apple Announced That People Actually Want, and One They Don’t

  Meet The Guilt-Ridden Oil Billionaire Trying To Save The Planet

  Joshua Brown: Disney Wants The Netflix Treatment, Renting A House, Breaking Up Tech Monopolies

  Howard Lindzon: Barry Ritholtz Joins Me On ‘Panic With Friends’ to Talk Financial Twitter, Bloomberg, His Dream Dinner Guests, and More

  Michael Batnick: And Now Some Bad News & New WAYT!

  Ben Carlson: Why Are So Many Unprofitable Companies the Best Performing Stocks This Year?

  Nick Maggiulli: The Best Investing Books for Every Kind of Investor

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• The Market Is Down After Second-Highest Close
  Eddy Elfenbein, October 13th, 2020 at 3:13 pm

  Yesterday, the stock market closed at its second-highest level ever. Today, the market has pulled back some. This morning’s CPI report showed that both headline and core inflation rose by 0.2% last month.

  The Labor Department said on Tuesday its consumer price index increased 0.2% last month after gaining 0.4% in August. The CPI advanced 0.6% in both June and July after falling in the prior three months as business closures to slow the spread of the coronavirus weighed on demand.

  In the 12 months through September, the CPI increased 1.4% after rising 1.3% in August. Economists polled by Reuters had forecast the CPI climbing 0.2% in September and rising 1.4% year-on-year.

  That’s not bad and it indicates that inflation isn’t heating up despite the Fed’s new permissive attitude. As I write this, the S&P 500 is off by about 0.60%.

  Disney got a nice boost today thanks to its reorg announcement. At one point, shares of the Mouse House were up over 5%.

  Here’s a chart of headline inflation:

  

• Morning News: October 13, 2020
  Eddy Elfenbein, October 13th, 2020 at 7:06 am

  Dalio Says ‘Time Is on China’s Side’ in Power Struggle With U.S.

  July Is the New January: More Companies Delay Return to the Office

  Walt Disney Restructures Entertainment Businesses to Boost Streaming

  Covid-19 Vaccines Are Chance at Salvation, Financial and Beyond, for Drug Makers

  First, A Vaccine Approval. Then ‘Chaos and Confusion.’

  J&J Halts Covid-19 Vaccine Trial Due to Unexplained Illness

  Apple Event Expected to Bring 5G Speed, Smaller iPhone 12

  Amazon Pandemic Prime Day Steals Rivals’ Black Friday Spotlight

  Amazon Bets on Prime Day in Latin America to Battle Local Rivals

  Audi to Build Electric Cars Geared to Chinese Buyers From 2024

  Retail Investors Embrace Risk and the ‘Hive Mind’ in Stock Boom

  Goldman Sachs Struggling to Reach Financial Targets

  Economists Tell Stories, Just Like Novelists — Don’t Let the Nobel for ‘Economic Sciences’ Fool You

  Three Rockefellers Say Banks Must Stop Financing Fossil Fuels

  Ben Carlson: Don’t Mix Your Politics With Your Portfolio

  Howard Lindzon: Momentum Monday – Blue Wave?

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• Disney’s Reorg Announcement
  Eddy Elfenbein, October 12th, 2020 at 4:39 pm

  After the bell, Disney released a statement.

  In light of the tremendous success achieved to date in the Company’s direct-to-consumer business and to further accelerate its DTC strategy, The Walt Disney Company (NYSE: DIS) today announced a strategic reorganization of its media and entertainment businesses. Under the new structure, Disney’s world-class creative engines will focus on developing and producing original content for the Company’s streaming services, as well as for legacy platforms, while distribution and commercialization activities will be centralized into a single, global Media and Entertainment Distribution organization. The new Media and Entertainment Distribution group will be responsible for all monetization of content—both distribution and ad sales—and will oversee operations of the Company’s streaming services. It will also have sole P&L accountability for Disney’s media and entertainment businesses.

  The creation of content will be managed in three distinct groups—Studios, General Entertainment, and Sports—headed by current leaders Alan F. Horn and Alan Bergman, Peter Rice, and James Pitaro. The Media and Entertainment Distribution group will be headed by Kareem Daniel, formerly President, Consumer Products, Games and Publishing. All five leaders will report directly to Bob Chapek, Chief Executive Officer, The Walt Disney Company. Disney Parks, Experiences and Products will continue to operate under its existing structure, led by Josh D’Amaro, Chairman, Disney Parks, Experiences and Products, who continues to report to Mr. Chapek. Rebecca Campbell will serve as Chairman, International Operations and Direct-to-Consumer. Bob Iger, in his role as Executive Chairman, will continue to direct the Company’s creative endeavors.

  “Given the incredible success of Disney+ and our plans to accelerate our direct-to-consumer business, we are strategically positioning our Company to more effectively support our growth strategy and increase shareholder value,” Mr. Chapek said. “Managing content creation distinct from distribution will allow us to be more effective and nimble in making the content consumers want most, delivered in the way they prefer to consume it. Our creative teams will concentrate on what they do best—making world-class, franchise-based content—while our newly centralized global distribution team will focus on delivering and monetizing that content in the most optimal way across all platforms, including Disney+, Hulu, ESPN+ and the coming Star international streaming service.”

  Under the new structure, the Company’s three content groups will be responsible and accountable for producing and delivering content for theatrical, linear and streaming, with the primary focus being the Company’s streaming services:

  STUDIOS: Messrs. Horn and Bergman will serve as Chairmen, Studios Content, which will focus on creating branded theatrical and episodic content based on the Company’s powerhouse franchises for theatrical exhibition, Disney+ and the Company’s other streaming services. The group will include the content engines of The Walt Disney Studios, including Disney live action and Walt Disney Animation Studios, Pixar Animation Studios, Marvel Studios, Lucasfilm, 20th Century Studios and Searchlight Pictures.

  GENERAL ENTERTAINMENT: Mr. Rice will serve as Chairman, General Entertainment Content, which will focus on creating general entertainment episodic and original long-form content for the Company’s streaming platforms and its cable and broadcast networks. The group will include the content engines of 20th Television, ABC Signature and Touchstone Television; ABC News; Disney Channels; Freeform; FX; and National Geographic.

  SPORTS: Mr. Pitaro will serve as Chairman, ESPN and Sports Content, which will focus on ESPN’s live sports programming, as well as sports news and original and non-scripted sports-related content, for the cable channels, ESPN+, and ABC.

  The Media and Entertainment Distribution group, led by Mr. Daniel, will be responsible for the P&L management and all distribution, operations, sales, advertising, data and technology functions worldwide for all of the Company’s content engines, and it will also manage operations of the Company’s streaming services and domestic television networks. The group will work in close collaboration with the content creation teams on programming and marketing.

• Should Disney Cut Its Dividend?
  Eddy Elfenbein, October 12th, 2020 at 12:16 pm

  Last week, Dan Loeb called on Disney (DIS) to suspend its dividend. Loeb is a well-known activist investor. Currently, Disney pays a semi-annual dividend of 88 cents per share, each July and December. The company skipped its dividend this summer.

  An annual dividend of $1.76 per share works out to over $3 billion per year. Loeb wants Disney to put that cash into its streaming service.

  But through it all, Disney’s streaming business has been a notable success story. After making its debut last November, Disney+ had 60.5 million subscribers worldwide by August—well ahead of analysts’ and Disney’s own forecasts. Its other offerings are Hulu, with 36 million, and ESPN+, with 9 million. Next year, Disney is also planning to add an international streaming service similar to Hulu, to be called Star.

  Barron’s points out that this is the opposite of what activist investors usually do. They’re known for pursuing short-term profits at the expense of long-term financial health. This time, Loeb is looking at the long term.

  I understand Loeb’s thinking, but I think he’s premature. In my view, it all comes down to Covid-19. If a vaccine comes out tomorrow, then Disney’s troubles go away. Disney is a company almost perfectly made to be impacted by the coronavirus.

  Relatedly, I floated the idea on Twitter recently of Disneyland leaving California. Most Twitterers responded by saying this was a very farfetched idea. Probably so. Still, the mess of Covid has allowed people to rethink what their business is about, and unthinkable options are now thinkable.

  

  (Note on the chart above. The black line is dividends. Disney switched from an annual to a semi-annual dividend.)

• The Racial Investing Gap
  Eddy Elfenbein, October 12th, 2020 at 10:31 am

  At the Washington Post, Michelle Singletary has an important column on the racial investing gap. For obvious historical reasons, many people of color have little trust in financial institutions. She describes how her own grandmother was unwilling to invest her savings.

  Big Mama eventually put aside about $20,000 for her retirement. But she kept it all in a simple savings account. The bank teller couldn’t even persuade her to put the money in a short-term certificate of deposit.

  “No, ma’am,” Big Mama told her. “Leave my money right in the savings account.”

  Federal Reserve data from the 2019 Survey of Consumer Finances found that Black families are far less likely than White families to have retirement investment accounts.

  “Among middle-aged families — who have the highest rates of account ownership — 65 percent of White families have at least one retirement account, compared to 44 percent of Black families,” the Fed said.

  Those who like to pigeonhole Blacks as financial illiterates argue that the disparity results from the failure of Blacks to comprehend the importance of investing. This viewpoint ignores the history of slavery and its enduring impact on the descendants of enslaved people.